People analytics: a data-driven HR approach to business success

Publish date:

February 9, 2018

Organizations across the globe are undergoing digital transformation impacting all business functions....

War is 90% Information—Napoleon Bonaparte

We all know and have heard that organizations today face a “war for talent” and winning this war requires new ways of finding and retaining talent. The winners in this war will be those who use data as a competitive advantage to locate and attract the right talent. Thus, it is no surprise that globally people analytics has been gaining ground in the last few years. Grand View Research, in its June 2017 report, estimated that people analytics application solutions and consulting services market is growing at 16% CAGR per year, and will reach USD 2 billion by 2025 globally.

Organizations across the globe are undergoing digital transformation impacting all business functions. HR can’t escape its own transformation. Studies indicate that 98% of data is being stored digitally today. As a result, all business functions have an opportunity to improve growth, performance, and productivity using data and analytics. For example, use of financial analytics or marketing analytics helps an organization to make better decisions related to money or customers. Similarly, use of people analytics improves quality of people decision making. For example, Credit Suisse found that reducing attrition by 1% results in savings ranging from USD 75 million to 100 million per annum (Recruiting Daily, April 2015). A technology company used people analytics to identify employees with high-risk attributes and made compensation decisions to retain them with proven ROI.

The “promise” of people analytics is based on two pillars:

Dealing with growing uncertainty of doing business with large-sized organizations, changing workforce dynamics, and global footprint. This can be addressed using predictive analytics by providing estimations of probability of events happening or not. For instance, finding best-fit talent that has the highest propensity to join a company or likelihood of people succeeding in promotion to a new role or probability of people leaving a company. This piece of analytics has aided people management decision makers to combine experience with data to make informed decisions with reduced risk.

Second is related to providing alternate options or ways to solve people management challenges like hiring or retention. For example, studies have found that specific aptitude and even intelligence tests are better predictors of work performance than interviews (Journal of Applied Psychology, 1994). Given that People Analytics provides powerful actionable insights, many organizations have applied people analytics beyond hiring and attrition to help line and HR managers improve business efficiency and effectiveness. Oil giant Shell applied people analytics to study what connects individual performances to organizational performance using employee engagement as a predictor of safety incidents finding that 1% increase in employee engagement results in 4% reduction in safety incidents.

People analytics is an evolving journey with new applications coming up such as deriving insights from analyzing “social” sentiments of employees, improving employee experience, personalized learning and many more.